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8/6/2019 TRRA_The Race for Global Leadership in Innovation-An Analysis of National RandD Strategies_March 2011

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THE RACE FOR GLOBAL

LEADERSHIP IN INNOVATION

An Analysis of National R&D Strategies


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The Toronto Region Research Alliance (TRRA) is a public-privatepartnership supported by the governments of Ontario and Canada,and a wide range of regional stakeholders from the private sector,universities, colleges, and research hospitals.

MISSION

TRRA is a regional economic development organization promotingincreased investment in research and innovation to furthereconomic prosperity.

GOALS

1. Increase awareness of the Toronto Region among global R&Ddecision-makers and influencers

2. Retain and grow foreign investment into regional organizations,and attract innovative foreign companies to locate here

3. Become the pre-eminent source of intelligence on regionalresearch assets and associated international trends

4. Promote enhanced research intensity among regional businesses5. Advance initiatives to strengthen research and innovation capacity

VISION

To transform the Toronto Region into a top 5 global center forresearch and research-intensive industry

TORONTO REGION INNOVATION ZONE

TRRA defines the Toronto Region based on the location of keyinnovation clusters in a broad geographic area anchored by the Cityof Toronto, and includes the surrounding regions of Durham, Guelph,Halton, Hamilton, Peel, York, Waterloo and Wellington.

ABOUT US


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TABLE OF CONTENTS

Executive Summary 2

Introduction 3

Scope 4

Canadas Innovation Strategy5

Innovation Plans at the Country Level 8

Stay ahead 8United States 8United Kingdom 9

Get ahead 11China 11South Korea 13

Exploit existing strengths 14Israel 14Netherlands 16

Address points of pain 18

India 18African Initiatives 20

National prosperity 22Germany 22Finland 23

Conclusion 26

Overview of Key Drivers for Innovation 28

List of Acronyms and Abbreviations 30

Methodology 31

Endnotes 32


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EXECUTIVE SUMMARY

Nations worldwide are aggressively spending on science and technology (S&T). Knowledge-driven economicgrowth has become a top priority on national agendas, and governments are investing heavily in education,commercialization, entrepreneurship, and state-of-the-art research centers.

As part of its mandate to monitor and analyze trends in global research and development (R&D), the TorontoRegion Research Alliance (TRRA) reviewed innovation strategies of nine foreign countries and Africa in order

to understand the main drivers for policy-setting around the world. Key drivers and priority areas were nation-specific and were identified from the study of national S&T strategies and policy papers. The analysis revealedthat there are five distinctive approaches to S&T: governments frame their national strategies to (1) stay ahead,(2) get ahead, (3) exploit existing R&D strengths, (4) alleviate points of national pain, or (5) maintain the currentlevel of prosperity.

While the challenge for developed-world countries is to stay ahead and maintaintop positions in S&T, nations in the emerging world have strong ambitions for futureS&T competitiveness. Countries in the Asian market are putting up substantialresources into activities to get ahead and catch up to innovation leaders. Although

the United States (US) remains first in terms of gross R&D expenditures and technology leadership, aggressivestrategies across Asia, especially in China, have pressed the government to continue to spend on science. Over

US$100 billion of the American 2009 Recovery and Reinvestment Act was allocated to all aspects of science,technology, and innovation. China poses a major threat; it has set an ambitious target of becoming aknowledge-driven economy by the end of this decade and the global leader in S&T by 2050. Although Chinais still ranked relatively low in global competitiveness and accounts for a small percentage of high-value globalpatents and scientific publications, its share is growing.

The focus of some strategies is on exploiting a countrys existing strengths. These governments haveidentified their industrial advantages and are attempting to make these industries and related research moreinnovative and more competitive. The Netherlands is an example of a country with a strategy that uniquelyemphasizes its traditional areas of strengths in plants, food, materials, water, and chemicals. India and manycountries across Africa, on the other hand, are moving ahead with S&T which will alleviate points of domesticpain associated with socioeconomic issues including high poverty rates, uneven distribution of wealth, health,

and water concerns. Lastly, innovation plans in countries such as Germany and Finland emphasize the broaderconcept of prosperity and, particularly, the use of S&T in maintaining the state of wealth. Innovation is viewedas key contributor to productivity and economic growth.

Within this global context, Canada has a strong agenda with a broad range of incentives and programs toexpand its innovation capacity. Realizing the global competition, the federal government has commencedan R&D review to collect input from business on the effectiveness of its policies and programs. This reportattempts to highlight the essential question: To what purpose is Canada investing in research and innovation?

National S&T strategies are clearly driven by a number of broader economic and social factors includinglagging economic productivity, recession, poverty, energy security, water scarcity, and wealth creation.Countries are trying to find S&T-based remedies to address emerging challenges. Furthermore, economiesare realizing that they cannot continue to depend on industrial and manufacturing prowess alone. Future

competitiveness and the overall health of any economy will hinge on the strength of the knowledge sector.Nations are in a race for global leadership in innovation because science and technology are the chiefinstruments that create value in the form of increased productivity, profit margins, and social well-being.

2 THE RACE FOR GLOBAL LEADERSHIP IN INNOVATION: An Analysis of National R&D Strategies

National S&T

strategies


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INTRODUCTION

Modern economies increasingly view science and technology (S&T) as a majorcompetitive edge and are exploring strategies to use innovation and intellectualcapital to drive economic development and growth. The current state of prosperityof some of the worlds largest economies, including the United States (US), Japanand Germany, can be partly attributed to their historic innovation strengths and

excellence in science and engineering. Their corporations and universities have taken leadership positions intechnology-intensive industries ranging from information and communications technology (ICT) and electronicsto biotechnology and high-performance materials.

"Innovation drives economic progress. For businesses, it will mean sustained or improved growth. For consumers, it willmean higher-quality and better-value goods, more efficient services and higher standards of living. To the economy asa whole, innovation is the key to higher productivity." Sir Andrew Cahn, Chief Executive of UK Trade & Investment1

Innovation and a strong focus on S&T are now more important than ever, both at the national and regionallevels. Most countries are moving toward idea-driven economies which recognize knowledge as one of themost important factors of production alongside labour and capital resources. Innovative economies are not onlymore competitive and resilient within the global setting, but gradually raise the standard of living for all citizensthrough productivity gains and enhanced products and services. Innovation generates ripple effects throughout

the entire economy by creating jobs in existing or entirely new industries and is therefore considered essentialto future prosperity.

"Two centuries ago, the dominant economic theory was mercantilism Today, theories of economic growth stressthe importance of human capital to knowledge-based economies, and many countries aim to increase their stockof brainpower via immigration. Christiane Kuptsch and Pang Eng Fong, International Institute for Labour Studies (2006)2

Countries are racing to transform themselves into innovation nations by settingaggressive national S&T agendas, establishing world-class research centers andnurturing local entrepreneurs. National strategies stress the creation of networksand private-public collaborations that stimulate innovation by encouraging diffusion

of knowledge across institutions. Education has become a priority for building a workforce with the depth oftalent and skills essential for coping with sophisticated technology and complex financial and managementsystems. Therefore, graduates in science and engineering, doctoral candidates and number of professionalresearchers are viewed as major assets and a key measure of a countrys ability to adapt to emergingindustries. Governments and corporations are competing for global talent and are recruiting top graduatesand researchers to universities and labs with generous incentives and fellowships.

This emphasis on S&T goes beyond mere technology-driven economic development.It is about finding solutions to problems deemed of vital national interest. Althoughthe extent of each problem may differ considerably between the rich and poor world,all governments are targeting R&D areas to address similar challenges includingageing populations, rising health care costs, disease, climate change, and poverty.

Above all, innovation agendas are drafted to strengthen the national knowledge base to limit threats tosecurity, be it national, political, food, or water security. This includes efforts to curb dependence on foreignresources, especially oil and gas imports. Countries are beefing up the talent and infrastructure with large-scale investments in defence applications, clean energy technologies, transportation, life sciences and healthcare, ICT and advanced manufacturing. Recent forecasts predict that over US$1.19 trillion will be invested inresearch efforts globally in 2011.3 In purchasing-power terms, the US will continue to lead the world in grossR&D expenditures with over US$405 billion while China and Japan are predicted to be second and third withabout US$154 billion and US$144 billion spent in each country, respectively (Figure 1).

S&T and increasing

importance to

national economies

Rise of innovation

nations

S&T to address the

grand challenges

of the 21st century


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SCOPE

Because many countries worldwide are rolling out ambitious strategies to boost domestic innovation andcultivate intellectual capacity for economic growth and competitiveness, the Toronto Region Research Alliance(TRRA) reviewed ten innovation strategies between June and December 2010. This research was carried outas part of TRRAs mandate to monitor and analyze global developments in innovation and, particularly, tounderstand the main drivers for policy-setting. The countries selected for review were the United States, theUnited Kingdom (UK), China, South Korea, Israel, the Netherlands, India, Germany, and Finland, as well asinitiatives across the continent of Africa. They represent the developed and developing world, and innovationleaders and followers. This study determined that, depending on the interplay between the drivers, S&Tpriority areas and funding programs, nations are working toward five distinctive goals in innovation:

1. stay ahead,

2. get ahead,

3. exploit existing strengths,

4. alleviate national points of pain, or

5. maintain the general level of prosperity.

This paper begins with an outline of the Canadian innovation strategy and examples of recent initiatives andprograms. We then provide an overview of other national innovation agendas and identify how they fit into theafore-mentioned categories. This is not intended to be an exhaustive analysis but rather a snapshot of recentdevelopments on the innovation front across the world.

National R&D Strategies at a Glance

Fig. 1

Forecast

R&Dexpenditure

(BillionsofUSDollars)

Source: Toronto Region Research Alliance analysis based on data from Battelle, 2011 Global R&D Funding Forecast.

Global R&D spending - Gross expenditures on R&D, by purchasing power parity (PPP)

Unite

dSt

ates

Chin

a

Japa

n

Germ

any

SouthKo

rea

Fran

ce

Unite

dKi

ngdo

mIn

dia

Cana

da

Russia

Brazil

Italy

Taiw

an

Spain

Australia

0

50

100150

200

250

300

350

400

450

US$ 24.3B

United StatesUntied Kingdom

ChinaSouth Korea

IndiaAfrica

IsraelNetherlands

GermanyFinland

Stay Ahead Get AheadExploit Existing

Strengths

Address Points

of Pain

Maintain Level

of Prosperity


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The worldwide resurgenceof innovation and S&T didnot go unnoticed in Canada.

The first set of Canadian innovation policies in the1990s was mainly a response to two key issues:lagging productivity relative to the US and theexodus of Canadian scientists. It was in 1997 thatthe government adopted a comprehensive innovationstrategy, which began with increased funding fordirect and indirect costs of research, investments inuniversity infrastructure, and provision of high-qualityresearch opportunities at Canadian universities.Subsequently, the Canadian government increased

support for research through programs includingthe Canadian Foundation for Innovation (CFI), theCanadian Institutes of Health Research (CIHR), andthe Canada Research Chairs (CRC) Program.4,5

Canada is forecast to be theninth-largest R&D spenderin 2011 with US$24.3 billion(in purchasing powerterms).3 Canadas spending

has grown at the same pace as the whole economyand the gross expenditures as percentage of GDP haveremained relatively constant over the last decade(Figure 2).6,7 With approximately 2.0%, Canadas grossexpenditures on R&D (GERD) as percentage of GDPare slightly below the average of other G7 countriesbut substantially above the BRIC (Brazil, Russia, India,

China) countries (Figure 3).8

Continuing the strong focuson S&T, the plan MobilizingScience and Technology toCanadas Advantage wasreleased in May 2007.9,10

Innovation is still believed to be the answer to whatare perceived as Canadas key national challenges:health care, national security, energy, natural resourcemanagement, and the persistent productivity problem.

CANADAS INNOVATION STRATEGY

Canadasexpenditures

on R&D

Canada

GDP/capita (international $): 37,945

Population (thousands): 33,740

GERD (2011 at PPP, billions, US$): 24.3

2011 R&D as % of GDP: 1.8%

GERD as % of world: 2.0%

Mobilizing Science

and Technology to

Canadas Advantage

The beginning

Fig. 2

0%

0.50%

1.00%

1.50%

2.00%

2.50%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

*200

8

*200

9

Canadian domestic domestic spending, *preliminary for 2008 and 2009

Source: TRRA analysis based on data from Statistics Canada, 2010

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

$

millions

GERD GERD as %GDP


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Fig. 3

2000 2001 2002 2003 2004 2005 2006 2007

GERD/GDP in G7, BRIC countries and Canada (2000-2007)

BRIC average

Top FiveCountry Average

G7 average

Canada

Source: TRRA analysis basedon data from Statistics Canadaand UNESCO Data Center,2010 (Note: GERD/GDP -Ontario 2.3%, Qubec 2.6%)

0

1.0%

2.0%

3.0%

4.0%

Strategic priorities in R&D have been set in responseto those challenges. Future investments by both thegovernment and the granting agencies are set to targetenvironmental S&T, clean energy technologies, ICT,health research and related life sciences.

The 2007 budget granted anextra $85 million to fundingcouncils for research grantsand scholarships as well as$80 million per year for

research that addressessocial and economic issues. Green technologiesreceived substantial funding through the $500 millionthat were awarded to Sustainable DevelopmentTechnology Canada (SDTC) in 2007 to create theNextGen Biofuels Fund for renewable fuels and$1 billion through the 2009 Clean Energy Fund. Anestimated $240 million was invested in GenomeCanada in the 2007 and 2008 budgets to advance theagriculture, crop, and bioproduct sectors. The 2009federal budget, Canadas Economic Action Plan,allocated about $5.1 billion in initiatives that can

contribute to Canadas excellence in entrepreneurship,people, and knowledge. The government set aside$2 billion for construction and infrastructureimprovements at Canadian universities and colleges.Federal labs received $250 million for repairs andupgrades. With its commitment to build an S&T hubin the Canadian Arctic, Canada is moving ahead tosupport research that ensures national security andsovereignty in the North.

The Canadian innovationstrategy also puts anemphasis on humancapital. Universities and

colleges received $9.7 billion in 2008-09 includingsupport for grants and loans to make education atthe post-secondary level more accessible to youth.The goal of the recently-launched Vanier CanadaGraduate Scholarshipprogram is to retain and attractoutstanding doctoral candidates with awards valuedat $50,000 per year for up to three years. Canadian

professors and their groups will be supported insetting up new programs at Canadian universitiesthrough twenty new $10-million seven-year CanadaExcellence Research Chairs (CERC). The governmentalso struck agreements with the provinces andterritories in 2008-09 to channel $500 million peryear over six years into new skills training programs.

Although contributions fromthe federal and provincialgovernments and universitiesput Canada amongst the top

G7 nations in public GERD,private sector investments are lagging. A recentreport suggests that the lack of innovative strategiesamongst Canadian businesses has been the reasonfor the gap in productivity growth. Businessexpenditures on R&D have remained relativelyconstant over this decade and are well below thoseof other Organization for Economic Co-operationand Development (OECD) countries. Investmentsin high technologies, particularly in ICT, have been

Challenges with

business

innovation


Investments in

infrastructure

and funding

programs

Investments in

human capital


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Notable inventions: Canada

The discovery of insulin is one of Canadas best-known medical breakthroughs. While working atthe University of Toronto under the supervision ofProfessor MacLeod, Frederick Banting andCharles Best developed a life-saving treatmentfor diabetes sufferers in 1921.

The BlackBerryTM series of handheld devices wasdeveloped by the Waterloo-based companyResearch in Motion (RIM). RIM was founded bythe University of Waterloo student Mike Lazaridis.

What began as a two-way pager in 1999, quicklyevolved into a sophisticated mobile e-mail devicewith web browsing capability.

Saskatoon scientists Keith Downey and BaldurStefansson developed canola oil in the 1970s.Derived from selections of rapeseed, it isconsidered one of the healthiest oils.

Other: Telephone (1867), anti-gravity suit (1941),electric wheelchair (1952), heart pacemaker(1950)

inadequate. Canadian exports to the US are facingtougher outside competition from Asian countries.It has been observed that Canadas prosperity hasdepended too much on the natural resources sectorwhich has a dominant position internationally but iseasily affected by commodity cycles. Despite thisadvantageous position, Canadas natural resources

firms have not sufficiently produced innovativeproprietary technologies but rather have adoptedforeign-made equipment and processes.12

Because Canadas productivity problem is actually abusiness innovation problem, the discussion about whatto do to improve productivity in Canada needs to focus onthe factors that encourage, or discourage, the adoption ofinnovation-based business strategies

This is a complex challenge because the mix of relevantfactors varies from sector to sector and requires a muchbroader conception of innovation than the conventionalR&D-centred view, which, while important, is toolimiting. Council of Canadian Academies (2009)11

The Canadiangovernment intendsto promote privatesector investment andentrepreneurial culture

with policies aimed at creating a more competitivebusiness environment for domestic companies aswell as foreign firms looking to invest in Canada.The federal corporate tax rate is scheduled to godown from 22.12% in 2007 to 15% in 2012. TheNational Research Council Canada Industrial

Research Assistance Program (NRC-IRAP) willreceive an additional $200 million over two yearsand the venture capital arm of the Bank of Canada(Business Development Bank of Canada, BDC) willuse $350 million in new funding to expand initiativesfor small- and medium-sized enterprises (SMEs) inthe technology sector.

Canadas first S&T strategy was partly a responseto a decline in performance relative to our largesttrading partner, the US. But there is also widespreadrecognition that Canada as a whole must now take

advantage of its excellent research instituitions andrelatively strong fiscal position to stake a claim inglobal innovation.

The world [is] progressing whether Canadians [like] it ornot and we should jump on the innovation bandwagon orrisk being left behind and having our precious Canadianinstitutions eroded or (worse) eliminated. Richard E. Mueller,Department of Economics, University of Lethbridge (2006)4

Creating a more

competitive business

environment


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STAY AHEAD

Countries in this category are widely perceived astraditional leaders in innovation. Developed-worldeconomies such as the US and UK have been at the

forefront of S&T fields but emerging markets areinvesting substantial resources into innovative activitiesthat are generating new products and services andchallenging their leadership positions. Hence,countries trying to stay ahead have made innovation apart of their comprehensive economic strategy in orderto maintain their position on the top tier of the S&Tladder. Although their scientific and engineeringsystems are not necessarily weakening, other nationsare rapidly improving their innovation capacity, thusnarrowing the gap between leaders and followers.13

Although the United Statesis ranked first in technology,innovation and R&Dexpenditures, the growing

unease about S&T strategies in China and across Asiahave pressed the federal government to set asidesubstantial funds for innovation.14 President ObamasStrategy for American Innovationreleased inSeptember 2009 allocated more than US$100 billionof the Recovery and Reinvestment Act for all aspectsof science, technology and engineering fromfundamental research and industrial R&D toeducation programs at all levels.15,16

In most broad aspects of S&T activities, the United Statescontinues to maintain a position of leadership but hasexperienced a gradual erosion of its position in manyspecific areas...Asias rapid ascent as a major world S&Tcenter beyond Japanis driven by developments in China

and several other Asian economies....All are seeking toboost access to and the quality of higher education andto develop world-class research and S&T infrastructure.U.S. National Science Board (2010)14

Basic research will receivea significant boost over thenext ten years with thedoubling of the budget

of three research agencies, the National ScienceFoundation (NSF), Department of Energys Officeof Science (DOE SC), and the National Institute ofStandards and Technology (NIST).17 The 2011 budget

has committed US$13.3 billion US$824 million morethan in the previous year and sets them well oncourse to achieve US$19.5 billion by the year 2017.18

These investments support fundamental research thatenables technological breakthroughs for industries oftomorrow and simultaneously addresses suchchallenges as cancer and energy. NSF is anindependent federal funding agency for basic scienceand engineering and its new funds will be used tofinance renewable energy technologies and next-generation ICT. The National Institutes of Health (NIH)received US$1 billion from the recovery budget for DNA

sequencing and the study of the cancer genome. Intotal, the NIH are setting aside US$6 billion for cancerresearch with potentially 30 new drug trials in 2011.19

The United States now has to compete for every job goingforward. That has not been on the table before. It has beenassumed we had a lock on white-collar jobs and high-tech

jobs. This is no longer the case. Craig Barrett, CEO Intel (2003)20

The main drivers for theAmerican innovation policyare high carbon emissions,health care, national

security, and Americasdeclining education system. The US has always beenable to draw top foreign researchers and scientists toits prestigious universities, government or industrylabs, but globalization has led to a fierce competitionfor both blue- and white-collar jobs. Although the USstill attracts the largest proportion of foreign students,its share is being slowly eroded. The performanceof the American education system is weakening ininternational comparisons. Recent graduation rates

Losing confidence

in US S&T prowess

Drivers for the

American innovation

policy

United States




2011 R&D as % of GDP: 2.7%


INNOVATION PLANS AT THE COUNTRY LEVEL

Investments in basic

science

THE RACE FOR GLOBAL LEADERSHIP IN INNOVATION: An Analysis of National R&D Strategies


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at the post-secondary and university levels are someof the lowest reported of all OECD countries.21

Therefore, the R&D stimulus also emphasizedimprovements in science, technology, engineeringand mathematics education at the K-12 level toproduce the next generation of highly-skilledemployees. The American strategy also focuses on

restoring and modernizing the physical infrastructure,including roads, highways, bridges, electrical gridsand broadband networks to stimulate the economyand improve the flow of products and services. Theaggressive international competition is a threat toAmerican leadership in innovation and has causedpolicy makers and industry to take bold action.

Although the United

Kingdom maintains itsposition amongst the topfive European innovationleaders, its performancehas eroded. The recentfinancial crisis left the UKwith a mounting national

debt. Britains GERD of 1.79% falls short of the 3%target set by the European Council at the LisbonSummit in 2000. Approximately 45% of UKexpenditures on R&D are derived from private

sources but venture capital investment in early-stagetechnologies dropped sharply from 214 million in2007 to 124 million in 2008. The UK InnovationInvestment Fund was created in 2009 as a 1 billionfund-of-funds for financial support of smaller privatefunds that can support businesses directly.

Notable inventions: United States

Leo Baekelands invention of Bakelite in 1907was a pivotal moment in the modern plasticsindustry. This first synthetic plastic transformedthe production of every-day items such as hairdryers, electrical wires and steering wheels.

The US military began to develop acommunications network during the Cold Warera that would withstand enemy nuclear attacks.The internet has its roots in the Department ofDefense Advanced Research Projects Agency

(ARPA). The first message was successfullyexchanged in 1969.

After seeing his father suffer through heart

disease and open heart surgery, Dr. Robert Jarvikinvented the artificial heart in 1982. The goal wasto allow heart disease patients to survive whilewaiting for heart transplants.

Other: Assembly line (1913), nuclear reactor(1942), laser (1958), human papillomavirus (HPV)vaccine (2006)

United Kingdom




2011 R&D as % of GDP: 1.7%


UK financial

performance

is suffering

Drop in VC

investment



Notable inventions: United Kingdom

A British Royal Air Force officer Sir Frank Whittleis credited with the invention of thejet engine in1930. World War II expedited the development ofthe jet engine for military purposes.

DNA fingerprinting is a relatively recent discoveryby the British scientist Alec Jeffreys of theUniversity of Leicester. His research on geneticmarkers for illness and disease led him to astunning conclusion in 1984: all individuals havea unique biological code.

Tim Berners-Lee, an Oxford graduate andphysics major, led the invention of the WorldWide Web (WWW) in 1989 at CERN, the European

Organization for Nuclear Research. He proposedthe definitions of URLs (Uniform ResourceLocators), HTML (HyperText Markup Language),HTTP (HyperText Transfer Protocol), the basicbuilding blocks and language of the web.

Other: Steam engine (1698), locomotive (1829),stainless steel (1912), human in vitrofertilization(1978)

Various RegionalDevelopment Agencies(RDAs) introduced theInnovation Vouchers

Scheme for SMEs to foster information exchangebetween researchers and private firms. Theprovision of 3,000 and 7,000 vouchers allows

SMEs to collaborate with research institutes oftheir choosing. This innovative scheme has proveneffective and 1,300 vouchers worth 4.5 million hadbeen distributed by mid-2009, only one year afterintroduction.22 Britains New Industry, New Jobsreleased in April 2009 includes a number ofindustrial strategies for innovation. For instance,Digital Britainprovides a framework for upgradingBritains broadband infrastructure.23 The LowCarbon Industrial Strategywill accelerate thetransition to a clean economy with innovative greentechnologies,24 and the Advanced Manufacturing

Strategywill enable manufacturing companiesto take advantage of advanced technologies andmaterials.25

Innovation accounted for up to two thirds of averagelabour productivity growth between 2000 and 2007.UK Annual Innovation Report (2009)22

A number of UK initiativesare intended to acceleratethe propagation ofknowledge and technology

from academia down to industry. Knowledge Transfer

Networks (KTNs), overseen by the UK TechnologyStrategy Board and boasting a membership of morethan 43,000 business members and 14,000 non-business members, are extensive networks thatconnect centers of excellence, universities,corporations, companies, funding bodies andorganizations across sectors. The EnergyTechnologies Institute was created in 2006 andis a private-public partnership for large-scalecollaborative energy projects. It brings togetherindustry partners, national research councils, anddraws on the expertise of many UK research

institutes in nine different areas, from offshore windto energy storage and distribution. The developmentof such knowledge networks took place in response tothe criticism that, although the UK is home to someof the worlds top-rated universities such as Oxfordand Cambridge, the overall commercialization rate islow. For a country that once led the world in industrialrevolution and trade, the current S&T plan is aboutmaintaining its leadership position in innovation inthe midst of the growing global competition.

Knowledge Transfer

Networks

Vouchers Scheme

for SMEs


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GET AHEAD

Countries in the developing world have set highambitions for future S&T competitiveness. Althoughthe Asian market still exports large quantities of low-value-added products, it is increasingly seen as a richsource of innovative ideas. Not only are the countries

in this region attracting large foreign businessinvestments due to their potential for S&T growth,but the nations themselves are spending substantiallyto modernize their innovation systems and to addresstechnology and patent infringements by tougheningdomestic intellectual property (IP) laws. The countriesin this category can take advantage of the concept ofleapfrogging to immediately move to the mostadvanced tools and technologies and skip theincremental and potentially long R&D stages thatled to them in the first place. However, the nationalgovernments are simultaneously investing in

infrastructure to undertake long-term researchefforts analogous to those of innovation leaders.

China traditionally served asthe workshop of the world.Design specifications, IP

and knowledge were typically imported, whileinexpensive Chinese-made goods were exported.That is now changing; China is creating an innovativeeconomy and has set an ambitious target of becominga knowledge-driven economy by the end of this decadeand the global S&T leader by 2050. Although China stillranks relatively low in global competitiveness, it hasmoved up from 35th in 2006 to 27th in 2010.26,27 Thecountry is a rich source of brainpower and producednearly 912,000 graduates in science- and engineering-related fields in 2006, compared to 478,000 in the USin the same year.28 The government is investing ininstitutes that will contribute to the overall S&T

development. For instance, the National Institute ofBiological Sciences in Beijing was created in 2003 asa strategic initiative to strengthen Chinas S&T in lifesciences and biotechnology.29 The Beijing Instituteof Life Sciences, under the auspices of the ChineseAcademy of Sciences (CAS), was established in 2008 tooversee CAS-affiliated biomedical institutes in Beijing

including the Institutes of Microbiology, Genomics andBiophysics.30 These investments are generating results.Chinas share of S&T publications has increased innearly all fields and this research frequently takesplace in the public sector.31 With over 1.42 millionresearchers, China is now second worldwide in thenumber of people in S&T behind the US.32

China has achieved a spectacularly high rate of economicgrowth over a sustained period for more than two decades.Nevertheless, today China faces the challenge of makingthe transition from sustained to sustainable growth fromsocial, economical, ecological and environmental points of

view. Innovation has been identified as a main engine forthis new growth model, and the Chinese government haslaunched a national strategy to build an innovation-driveneconomy and society by 2020. OECD (2008)33

Government strategiesreleased since 1978, withthe eleventh Medium- toLong-Term Plan for the

Development of Science and Technologyannouncedin 2006, reveal the steady transformation of Chinasinnovation policy from a government-centric to market-centric endeavour.34 The country is moving away from

imported technologies while focusing on generatingindigenous innovation with domestic inventors whoown the IP, thus confirming that knowledge is the newengine of economic growth and those who controlideas reap economic benefits. China as a whole stillmakes up a small proportion of global high-value S&Tpatents, which are defined as inventions with patentprotection in the US, the European Union and Japan;but it has grown slightly from 0.13% in 1997 to 1.0% in2006.35 Even the make-up of Chinas foreign directinvestment (FDI) has evolved to reflect focuson knowledge-intensive activities. This marks a shiftfrom the past in which majority of foreign companiesused China as a low-cost locale for outsourcing ofmanufacturing operations. Multinational corporationsnow increasingly invest in Chinese expertise and thereare more than 900 R&D centers.36 Firms such asEricsson, AMD, Novartis and Siemens have establishedR&D hubs across China.

China


Population (thousands): 1,331,460


2011 R&D as % of GDP: 1.4%


Chinas ambitions

Fostering indigenous

innovation


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Notable inventions: China

In 1965, research scientists working at theBiochemistry Institute under the auspices ofthe Chinese Academy of Sciences synthesizedcrystalline bovine insulin. It was the first man-made bioactive protein, a living molecule, andset off the field of synthetic biology.

After years of research, hybrid rice wassuccessfully developed by Yuan Longping, anagricultural scientist in the Hunan Province in1973. His research into hybrid rice breeding

transformed rice production.

The worlds narrowest carbon nanotubes,measuring 0.5 nm in diameter, were created by

Chinese scientists in 2000. Nanotubes exhibit avariety of electrical and mechanical propertiesthat are useful in materials and electrical devices.

Other: Four great inventions of ancient China:paper making (c. 200 BC), gunpowder (c. 800),compass (c. 1000), printing (c. 300)

A key driver of Chinasnational innovationpolicy is its rising energydemand and the externalpressure to curbconsumption. Latest

reports by the International Energy Agency (IEA)

reveal that China has now moved past the US asthe worlds largest consumer of energy.37 Chinahas already established itself as the leadingmanufacturer of solar cell panels and mayeventually become a strong contender in theproduction of wind turbine equipment. Withapproximately 70% of its current demand derivedfrom coal, there is a push to install solar and windcapacity for the domestic market. China is, in fact,poised to become the worlds largest generatorof electricity from renewable sources.38

It is widely believedthat Chinas growingpopulation will shapefuture consumer trends.Emerging markets arecoming up with new and

innovative products at an astonishing pace. Millionsof potential customers in these markets are drivingthe development of products that satisfy localdemand and the design of supply systems thatcan efficiently reach the masses. Some segmentsof the Chinese population are already enjoying

rising incomes and the government aims tocontinue raising the standard of living by triplingper-capita income, from US$1000 in 2002 toUS$3000 in 2020.34 In fact, this is a key componentof the proposed twelfth economic plan coveringthe period 2011-15. The central government hasplaced the notion of a balanced economy, ruralmodernization and narrowing the income dividebetween rich and poor at the top of the economicagenda.39 The changing role of China in the worldand its growing ambitions have prompted othergoverments to respond with investments in S&T.

Although China will undoubtedly play a majorrole in global innovation, the challenge for thegovernment is to sustain rapid growth withoutcreating internal economic imbalancesand tension.

Chinas growingpopulation will shape

future consumer

trends

Key driver of

innovation policy

is rising energy

demand



15/40

South Korea hasundergone a remarkabletransformation from acountry which sustaineditself on agriculture,

textiles and footwear to a technologically-competitive

nation, particularly in the area of ICT. Much of itsbasic innovation infrastructure and capacity buildingtook place in the 1970s and 1980s, about two decadesfollowing the end of the Korean War. The last 20 yearshave been marked by a more coordinated approach toS&T policy. The nature of innovation in the countryhas gone through multiple phases, from one inwhich learning occurred largely through reverseengineering and imitation to one with the markof a sophisticated knowledge-driven economy.40

The Korean government

has set an ambitious goalof not only reaching thetop nations in S&T butalso surpassing them inspecific fields by the year2025. The government set

out its long-term strategy in its 2000 document calledVision 2025: Koreas Long-term Plan for Science andTechnology Development. Much of Koreas prosperitydepends on the ICT sector. The IT 839 strategy wasrolled out in 2004 with emphasis on eight specificIT services, three infrastructure networks, and nine

hardware and software industries with growthpotential, such as next-generation mobile devices,digital TV/broadcasting equipment, home networkequipment, etc. In fact, Korea is rolling out the mostadvanced communications network in the world,led by a consortium of government researchinstitutes and companies. The vision behind thestrategy is to promote investments in specific ICTareas, push the convergence of technologies, create

a fully-connected society and continue to set standardsin a field that has been a traditional area of strengthfor Korea.42

Korea has [had] tremendous economic achievements in thelast 60 years. Torn apart by war and suffering from absolutepoverty, Korea was one of the poorest countries in theworld. Despite a late start in industrialization, Korea is nowthe 12th largest economy and is a worldwide leader in anumber of key industries, such as semiconductors [and]ship-building. However, Korea needs to find a new and moresustainable path for further development PresidentialCommittee on Green Growth (2009)41

The government has highhopes for biotechnology tobecome a major industryalongside ICT. The planBio-Vision 2016 was

revealed in 2008 and represents a commitmentof about US$14.3 billion in biotech research andindustry in the next decade.42 First established in1985, the Korea Research Institute of Bioscience andBiotechnology (KRIBB) has now become the focalpoint of biotech research in the country, from thedevelopment of biotechnology platforms to technologytransfer and commercialization. Researchers atthe Institute are building Korean competence inbiotechnology and are simultaneously searchingfor solutions to broad societal problems, includingageing, cancers, neuro-degenerative diseases, andbio-based oil substitutes.43 Although Korea has madetremendous strides over the last four decades with

significant and early investments in S&T, the issueof limited natural resources and the resultingdependence on foreign oil still remains. Thegovernment set up the Presidential Committee onGreen Growth in 2009 and allocated US$80 billiontowards the development of green technologiesbetween 2009 and 2012.

Relative to other Asiancountries, FDI has playeda rather insignificant role inSouth Koreas technological

evolution. The R&Dlandscape in the country has been dominated by thenational government and the chaebol, Koreas family-owned business conglomerates that have evolved intoglobal giants, including the likes of Hyundai Motors,Samsung, and LG.40 However, the emphasis on appliedscience has left Korea with deficiencies in basicresearch. The government is investing more thanUS$3 billion between 1999 and 2012 into an education

South Korea




2011 R&D as % of GDP: 3.0%


Evolution of the

South Korean

innovation system

Vision 2025:

Koreas Long-termPlan for Science and

Technology

High hopes for

biotechnology and

green technologies

Koreas

conglomerates

(chaebol)



Notable inventions: South Korea

Seoul-based firm SaeHan InformationSystems was the first company to develop andmanufacture MP3 players in 1998. The MPManF10 was the first portable digital player and itwas capable of holding 32 MB of music. TheSouth Korean industry began to install MP3players into mobile phones in 2001.

Introduced in 2006, Wireless Broadband (WiBro)differed from other internet standards becauseit was designed to keep the internet connection

while moving at high speeds in a train or a car

Samsung, which started out as a manufacturer ofblack-and-white TVs, has set many industry and

world firsts including the development of 30-nm-class dynamic random access memory (DRAM),first full HD 3D LED TV and 3D home theaterin 2010.

Other: Digital TV production (1998), 3D thin-filmtransistor LCD monitor (1999), largest flexible e-paper (2010)

reform plan called Brain Koreawith the objectiveto develop R&D talent and strengthen Koreanuniversities. These learning programs are naturalextensions of the Korean value system becausethe society as a whole has traditionally placedmuch emphasis on S&T education and technologyadoption. Koreas rise from an agrarian society has

been attributed to the strong commitment to S&T-driven economic growth. South Korea has evolvedinto one of the most technologically advanced andbest connected societies in the world. But futureambitions will depend on its ability to createindustries outside of ICT, and to do so in faceof limited natural resources, competition fromimmediate neighbours and security threats fromthe North.

EXPLOIT EXISTING STRENGTHS

Many nations have points of comparative industrialadvantages and economic strengths that reflect acountrys history and development. Some nationalgoverments are leveraging these strengths to buildup capabilities in high technology. A study of theirinnovation plans reveals that they are focused onmaking existing industries more innovative andcompetitive or using the current businessinfrastructure and talent pool to diversify intobudding areas such as the renewable sector.

Israel is an exampleof a resource-poorcountry that is exploitinghistorical R&D strengthsto grow capabilities in

renewables, ICT and biotechnology. It is the countrywith the highest expenditures on R&D as percentageof GDP (4.9% in 2008), mainly due to large

Israel




2011 R&D as % of GDP: 4.2%


High private sector

expenditures on

R&D


17/40

contributions from the private sector. The Israeligovernment accounts for only 19% of the totalspending relative to the OECD average of 29%.44

High-technology makes up nearly 50% of allindustrial exports and is therefore crucial for thenational economy.45 Israeli ICT companies have thereputation as innovators and entrepreneurs. Because

of the small size of the domestic market, Israelicompanies become export-oriented from the start.They have found tremendous success in niche ITmarkets, including Voice over Internet Protocol(VoIP), encryption, automated inspection of printedcircuit boards and firewalls.

After Israel became anindependent state in 1948,the government took onthe central task ofplanning industrialactivities which were

rather traditional in nature, such as agricultureand textiles. Contrary to present-day Israel, R&Dactivities in the early years were concentratedin public research instituitions and GERD aspercentage of GDP was under 1%. The economyremained relatively regulated until the 1980s.However, because of persistent national securitythreats, Israel made efforts in the 1960s to achievemilitary self-reliance and build a strong defenceindustry. The focus on national defencefundamentally shaped Israelis attitude to S&T. The

labor force was virtually transformed because themilitary demanded state-of-the-art technologiesand highly-skilled scientists and engineers.Government policies in the 1970s started to focuson advanced R&D capabilities. The state began tosee the industry as the vehicle for conducting R&Dwhile allowing knowledge to flow out from academiaand defence to the private sector through private-public partnerships.46

This attitude spilled overinto other sectors and

particularly into ICT. Thissector was the driving force of the economy in the1990s; its share of GDP increased from 5% in 1990to 14% in 2000. ICT multinationals have played anextremely important role in moulding Israels S&Tenvironment. The first set of firms set foot in Israelthrough establishment of R&D centers in the 1970s.47

IBM Scientific Center was created in 1972 and, withover 500 employees, is one of its largest centersoutside the US.48 The Intel R&D Center in Haifa

Early focus on

national security

and defence shaped

S&T in Israel

Rise of ICT

Notable inventions: Israel

Modern drip irrigation was developed in the1960s by the Israeli engineer Simcha Blass.Developments in the plastics industry made theinvention possible. The system consists of plastictubes and nozzles to deliver water to plantsslowly and with precision.

Voice over Internet Protocol (VoIP), the firstinternet phone technology, began with a smallIsraeli company VocalTec Communications in 1995.VOIP converts voice signals into packets that are

transmitted over the internet and allows peopleto make low-cost long-distance telephone calls.

In 2001, the Israeli firm Given Imagining

introduced the PillCam, a pill-sized capsule withan embedded camera and light source that canbe ingested for imaging the gastrointestinal tract.In some cases, it is a less invasive alternative toendoscopic exams that does not require sedation.

Other: Unmanned aerial aircraft (1982), firewallsecurity software (1994), instant messaging, icq(1996)


18/40


19/40

Notable inventions: Netherlands

The electrocardiogram (ECG) was invented bythe physiologist Willem Einthoven in 1902. Hedesigned a prototype for registering electricalheart signals and pioneered the field ofcardiology.

Rally driver driver Maurice Gatsonides wasthe inventor behind the speed camera. As asports car enthusiast, he designed a speed-measurement system to help him go faster inrally circuits. He saw potential in other markets

and founded Gatsometer B.V. in 1958.

It was in 1982 that Philips and Sony jointlyintroduced the scratch-free compact disc (CD)

standard. The production began at a Philips plantin Germany. CD length was set at 74 minutes to fitthe entire recording of Beethovens 9thSymphony.

Other: Optical microscope (c. 1600), opticaltelescope (1608), navigable submarine (1620)

The Knowledge &Innovation Program (K&I)department, which is runwith the involvement ofmultiple ministries,

announced a long-term strategy in 2008 that focuseson pillars of innovation: talent, public and private

sector research, and entrepreneurship. K&I alsosets agendas for overarching themes deemedessential to society such as energy, water, healthcare, education, and sustainable agriculture. Thegovernment introduced two new schemes worth280 million for 2009 and 2010 through the stimulusbudget. The Knowledge Workersprogram allowsindustry researchers and scientists to work at publicinstitutes for up to eighteen months, whereas theHigh Tech Top Projectsprogram funds large-scaleR&D projects. This enables businesses to continueto employ R&D personnel.56 The goal of the national

Knowledge Investment Agenda(KIA), tabled by theadvisory body Innovation Platform, was to propelthe Netherlands into the top five most competitiveknowledge societies by 2016, from 8th place in the2008 global competitiveness index. KIAs proposedpilot program called 1000 Ph.D.sis intended toboost Dutch graduate research by enticing highly-skilled Chinese talent to undertake doctoralresearch in the Netherlands, particularly, becauseHolland has been suffering from a shortage ofscientific talent.

The governmenthas recognized theimportance of knowledgein attracting companieslooking for high-value

manufacturing and R&D locations. The long-termplan is to attract at least a hundred major globalcompanies, including those from emerging markets,that align with Dutch key industrial strengths.The government is advancing traditionally strongindustries including plants and food, materials,water, and chemicals. Initially, the state has set

aside 2.5 million per year over three years toattract fifteen knowledge-intensive firms and R&Dinvestment in two areas: flowers and food andchemicals. The objective to garner a share of globalforeign investment is a remedy to a weakness inHollands innovation system: total investments inknowledge stood at approximately 1.7% of GDP in2009, which is well below the European target of 3%.Corporate investments in R&D were relatively lowwith about 1.0% of GDP, whereas the goal for Euro

Government

schemes and

programs

Attracting andretaining knowledge-

intensive firms


20/40

zone countries stands at 2.0%. The government hasattributed this to a lack of onshoring of internationalR&D activities in the Netherlands. To encourageentrepreneurship and domestic innovation, the GrowthAcceleratorprogram was created to achieve a numberof specific targets, for instance to increase the numberof innovative start-ups by 50% from the current 3,100,

and increase the share of fast-growing firms from 8%to 12%.57,58,59 The Netherlands is investing in itsindustrial strengths and the supporting R&Dinfrastructure to reverse trends concerning theshortage of knowledge workers and decliningcorporate expenditures on R&D.

ADDRESS POINTS OF PAIN

Some of the worlds most populous nations are plaguedby deep-rooted socioeconomic issues: high poverty

rates, uneven distribution of wealth, failing or inadequateinfrastructure and pressing challenges associated withhealth, sanitation, water and food. Unlike other nationsthat are clearly framing their S&T policies to becomeglobal leaders in innovation, the strategies in thiscategory are aimed at addressing points of national pain.The emphasis is foremost on meeting social needs andsatisfying local demand.

Indias rise in the fields of

information telechnology,telecommunications,health andpharmaceuticals isremarkable given thatIndias economy remainedrelatively closed to foreign

trade and investment until the late 1980s. Theserestrictions were lifted gradually in the early 1990s.Not only did the government become more accepting

of trade, it actively sought out foreign investmentwith tax incentives and regulatory reforms. The ICTindustry has witnessed a spectacular success inIndia, which has become one of the top-exportingnations in software and related services. FDI hasflourished; in the 2009-10 fiscal year alone, Indiaattracted US$26 billion in investments.60 Hundreds

of companies have moved their service operations toIndia and about 650 multinationals, including IBM,Delphi, General Electric, and Hewlett-Packard, areexpanding R&D centers in the country. India hasworked to strengthen the innovation system tosupport these efforts, especially through nationallaboratories and the highly-regarded Indian Institutesof Information Technology (IITs). Led by the Ministryof Communications and Information Technology, thegovernment has established 39 Science TechnologyParks of India (STPI) since 1991 to offer facilities,computers, communication networks and services

to export-oriented businesses.42

The next ten years would be dedicated as a Decade ofInnovation. It may be a symbolic gesture but an importantgesture to drive home the need to be innovative in findingsolutions to our many challenges. Indias President PratibhaPatil addressing a joint sitting of Houses of Parliament (2009)61

Although the informationtechnology sector, whichhas experienced mostrapid growth, employed

more than one million people in 2004, it still accountsfor a minor share of total employment. In fact, 89%of Indian workers find themselves in so-calledinformal sectors largely agricultural activities.Since 1951, India has released eleven five-year plansthat set the strategy for the overall direction of thecountry. The years between 2002 and 2007 (TenthPlan) was a period of strong economic growth withan annualized growth rate of 7.7%. Although povertyhas fallen from 36% of the population in 1993 to 28%in 2005, it still persists. The government hopes tolimit further economic inequality with an inclusivegrowth strategy, which ensures that all benefit

from Indias rise. The countrys renewed focus oninnovation, science and technology is meant toaddress the needs of the poor: (1) how to provideincome opportunities for those outside of Indiasformal industry sectors, and (2) how to integratethose moving from the traditional economy intothe new knowledge sectors of urban centers.62

India


Population (thousands): 1,155,348


2011 R&D as % of GDP: 0.9%


Opening up of the

Indian economy

Success of the ICT

industry

Indias inclusive

growth strategy



21/40

Notable inventions: India

The Jaipur Foot is a cheap below-knee prosthesisthat was created by the craftsman Ram ChandraSharma in 1968 for the developing world andlandmine-affected regions. With the naturalmovement and appearance of an ordinary foot,the prosthetic is more versatile than Westernalternatives.

The Indian-American microbiologist AnandaMohan Chakrabarty developed geneticallyengineered organisms that could metabolize

crude oil in 1971 at General Electric. His patentfor oil-eating bacteria was highly controversialbecause it sought protection for a living organism.

In 2010, the Indian government released theprototype for the worlds cheapest laptop thatwas co-developed by Indias leading Institutesof Technology and Science. This touchscreencomputer costs only US$35 and is primarilyintended as an aid for students.

Other: Number zero (5th century), assembly-lineheart surgery (2001), Nano, the worlds cheapestcar (2008)

A unique aspect of Indiaspolicy is the extent towhich innovation isdirected towards

impoverished and rural communities. It is notonly about channeling existing public and privateR&D efforts to produce technologies and devices

for the poor, but also about fostering innovationand entrepreneurship at the grassroots level.Grassroots innovations originate in the communityand are based on tacit knowledge, traditional ideasand practices, which are typically less expensive yetmore efficient. An example is the Rain Gun, a low-cost irrigation system created by a 70-year-oldfarmer, which was successfully commercializedby the Rural Innovation Network. The currentEleventh Year Plan (2007-12) aims to increaseR&D expenditure from 1% to 2% of GDP to addressenergy and food security, water scarcity, water

quality, and terrorism.63

The Indian governmenthopes to improve higher-level education andincrease the overall

enrollment rate in post-secondary institutions from11% to 21% over the next decade. Although Indiastotal number of graduates outnumbers many othercountries, it is estimated that only a quarter of allgraduates have the qualifications and knowledgedeemed of good enough quality for the industry.42

Indias elite instituitions, IITs and the IndianInstitutes of Management (IIMs), produce thecountrys highly-coveted graduates and thecompetition for placement is fierce. However, amajor challenge lies in the brain drain as manygraduates and potential doctoral students headoutside for better opportunities. Consideringthe current state of affairs, education is a topgovernment priority and, especially, because Indiasyoung and English-speaking workforce is a keyreason why some economists predict that Indiaseconomic growth rate will overtake Chinas by

2013.64 The innovation policy in the worlds largestdemocracy is therefore a means to alleviate pointsof pain that present major obstacles to growth.

Grassroots

innovations

Improving higher-

level education



Although a vast continent steeped in culturalrichness and diversity with tremendous differencesfrom country to country, Africa as a whole isgrappling with common issues ranging fromfood and water scarcity, weak and neglected civilinfrastructure to drought, desertification, anddisease. In the past, governments have relied onforeign aid and have, in most cases, failed to buildup the R&D capacity necessary to address thesefundamental concerns.

A problem for Africa as a whole, as it has been for China andIndia, is the hemorrhage of talent. Many of its best studentstake their higher degrees at universities in Europe, Asia andNorth America. Too few returnThat is at least in partbecause of a chronic lack of investment in facilities forresearch and teaching. Thomson Reuters (2010)65

Created in 2003 underthe New Partnership forAfricas Development(NEPAD) and the AfricanUnion (AU), the African

Ministerial Council on Science and Technology(AMCOST) brings together ministers responsiblefor S&T from all AU member states. It is the venuefor policy planning and priority setting for the wholecontinent. Africas leadership has recognized thesignificance of S&T in solving fundamental issuesthat pervade many of their countries and releaseda plan for action in 2006. At the core, it is aboutfostering innovation that works towards theachievement of the United Nations MillenniumDevelopment Goals (MDGs). The Council proposedflagship programs calling for research in a number

of areas, including conservation, sustainable useof biodiversity, biotechnology, energy, water,materials science and manufacturing, ICT,and space science technology.66

The African S&T plan ispushing for strengtheningmaterials science andmanufacturing researchto repair neglected orconstruct non-existentinfrastructure including

roads, railway and telecommunications lines, whichpresents a major development challenge. BecauseAfrican institutions often lack the equipment andfacilities to undertake sophisticated ICT research,the strategy is embrace innovation in free andopen-source software, whose development andimplementation costs are typically lower and cansimultaneously circumvent the infrastructure issuethrough such applications as e-banking, e-health,e-education and e-government. In fact, Africasgeography, climate and population distributionlend themselves to innovative e-business models.

Mobile money, the use of cell phones for financialtransactions including depositing, withdrawing andsending money, shows how existing technology canbe used in interesting ways to ease the lives of thosewithout bank accounts or in regions without systemsin place.67

Biotechnology applicationscan address issuesconcerning foodproduction, environmentalsustainability and disease.

There are tremendous possibilities for innovation inagriculture, from the development of biopesticides,biofertilizers, and irrigation systems to biotechnologytechniques to generate enriched crops withresistance to drought. Just like India, Africancountries are rich in indigenous knowledgeaccumulated from years of dealing with scarcityof natural resources but the connections betweenformal R&D institutitions and communities areweak or non-existent. National governments willundoubtedly have to rely on foreign investmentand aid for building up formal R&D efforts.

A network of four regionalcenters of excellencewas established throughthe NEPAD African

Biosciences Initiative(ABI) whose design was fundedwith $30 million from the Canada Fund for Africaoverseen by the Canadian International DevelopmentAgency (CIDA).68 The objective is to enable scientistsin each region to share laboratories and technical

Strategies in

materials science

and manufacturing,

free and open-

source software

African Ministerial

Council on Science

and Technology

African Initiatives

Wealth of

opportunities in

biotechnology

African Biosciences

Initiative


23/40

Notable inventions: Africa

The South African doctor Christiaan Barnardperformed the worlds first human hearttransplant in Cape Town in 1967. Although thenine-hour operation was a success, the patientdied 18 days after the surgery due to pneumonia not heart failure.

The theoretical foundation for the computed axialtomography scan (CAT scan) was laid by theAfrican physicist Allan Cormack during his stay atTufts University in the US. The CAT scan generates

a map of soft tissues in the human body and helpsidentify diseases of the nervous system.

A mobile-money system (or M-PESA) was

introduced in Kenya in 2007 and quickly enabledaccess to financial services in an environmentwithout extensive banking infrastructure, but withhigh cell phone adoption. M-PESA is particularlypopular in rural areas and has been one of themost significant ICT innovations in Kenya.

Other: Oil-from-coal refinery (1950), PlayPumpwater system (2006)

expertise in biotechnology for applications inhealth and agriculture. The centers of excellenceinclude Biosciences East and Central Africa at theInternational Livestock Research Institute (ILRI) inNairobi (Kenya), the Southern African Network forBiosciences hosted at the Council for Scientific andIndustrial Research in Pretoria (South Africa), the

West African Biosciences Network headquarteredat Institute Senegalais de Recherches Agricolesin Dakar (Senegal), and the Northern AfricaBiosciences Network at the National ResearchCentre of Cairo (Egypt).69

Africans carry a heavyburden of global disease,which makes medicalinnovation one of the

most important areas of focus. The AU, Councilon Health Research for Development (COHRED)and NEPAD recently put forth a guide for nationalgovernments wishing to design and implement apharmaceutical innovation system for local drugdevelopment and production.70 One of therecommendations is a strategy based on regionalcooperation and sharing of resources similar tothe afore-mentioned NEPAD-ABI because only ahandful of countries within Africa have the capacityto contribute to the value chain. Nigerias NationalInstitute for Pharmaceutical Research andDevelopment (NIPRD) is part of its national strategyto push the local production of essential drugs.

The Institute conducts research in plant-baseddrugs and pharmaceutical raw materials and hasrecently received a US$230,000 grant from theWorld Bank to produce anti-diabetic phytomedicine.71

Essentially, the questions that remain for Africaare about how to achieve a sense of self-sufficiencyin S&T, combine the old with the new and how totake advantage of wealth of traditional knowledgethat exists in its communities. African leadershipsees S&T as an essential tool to solve pervasivechallenges that hinder the continents prospectfor economic development.

Pharmaceutical

innovation strategy


24/4022 THE RACE FOR GLOBAL LEADERSHIP IN INNOVATION: An Analysis of National R&D Strategies

NATIONAL PROSPERITY

A number of national S&T plans fit into the prosperitycategory. These countries have integrated innovationinto a broad national economic strategy to maintainthe state of wealth and enable competitivenessin the global economy. Research and technologydevelopment are used to drive productivity, sustaingrowth, create jobs, and make domestic industriesmore resilient to foreign competition and economiccycles. Finland and Germany are amongst leadingcountries in innovation and, above all, their strategiesstress the importance of S&T to drive productivity,growth and jobs.

Germany is frequentlydubbed the economicengine of Europe butthe country faced major

challenges in the 1990s which have only been recentlyovercome. German economic growth suffered afterthe reunification of East and West Germany in 1990and there was widespread unemployment anddependence on social security and welfare systems.This low-growth period persisted until 2006 whenGermanys growth rate jumped to 2.9% fromapproximately 0.8%, which was the norm in the early2000s. The boom was driven by Asian demand forGerman exports and some early labour and social

security reforms.72

A recent report argues that thisgrowth could only be sustained through a reformplan that strengthens the national innovationframework and revamps the corporate financingand taxation systems to support innovativestart-ups.73

In the medium and long terms, however, the currentfinancial and economic crisis will not stop the globalrace for knowledge from re-accelerating. Internationalcompetition for talent, technology superiority and marketleadership will continue to grow. In countries relativelypoor in natural resources, such as Germany, enhancedinnovation will provide the decisive basis for growth,new jobs and prosperity. Innovation is the key to a rapidrecovery. German Federal Ministry of Education and

Research (2009)74

Germany has had a long-standing reputation forengineering and science

excellence but its 2006 High-Tech Strategyformallyset out to brand the country as the Land of Ideas.74

It recognized that challenges associated with health,climate and resource efficiency, transportation,and national security must be addressed throughadvancements in key enabling technologies: ICT,laser technologies, production technologies, materials

technologies, biotechnologies, nanotechnologies,microsystems technologies, and services.

Germany is makingsubstantial investmentsin basic R&D to supportlong-term industrialdevelopments. The

Fraunhofer-Gesellschaft is a large German researchorganization with close ties to industry. Nearly 60Fraunhofer Institutes across the country conductindustrially-relevant research. About two-thirds of

its

1 billion budget is derived from private contracts.The federal and state governments contribute one-third for basic research that anticipates industrial orsocietal questions that may arise a decade down theline.75 The Fraunhofer Institute for Solar Energy inMunich is the largest research center of its kind inEurope and was established in 1981 to pursue workrelated to solar technologies from basic science toproduction technology and prototypes.

One of the core elementsof Germanys strategy isto empower the GermanMittelstand(Germanysequivalent for SMEs).The government wants toensure that innovation and

prosperity do not only remain concentrated in the labsof large corporations but be spread among Germanstart-ups and SMEs. Several programs, includingthe KMU-innovativscheme and Central InnovationProgramme for SMEs, improve access to financing

Germany




2011 R&D as % of GDP: 2.3%


Germanys economic

woes in the 1990s

High-Tech Strategy

Investments in

industrially-relevant

R&D

Empowering the

German Mittelstand

and leveragingprivate sector R&D

investment


25/40

and provide for collaboration and networkingopportunities. In addition, the 272-millionHigh-Tech Startup Fund grants up to 500,000for fledgling R&D companies. These measuresshowed early signs of success as German SMEexpenditures on R&D increased from 6.6 billionin 2006 to 7.4 billion in the following year. The

government policy aims to leverage private sectorR&D investment so that each euro of governmentmoney spent delivers five euros from business.This is being achieved through the creation ofpartnerships and formal innovation alliances topool expertise and resources. Ten business-academic alliances were established in 2007 and2008 and 600 million of government funds wereleveraged in the form of more than 3 billion frombusinesses.76 The goal for the economic and S&Tengine of Europe is to secure long-term prosperitythrough strategic investments in R&D as well as

business innovation.

Finland has consistentlyranked amongst theinnovation leaders inEuropean and global

competitiveness indices. The Finnish governmentattributes this success to the quality of itseducation system and a long history of spending

on R&D by both the public and private sector.However, Finland was the hardest hit Europeancountry in the recent economic crisis with a GDPdrop of 8% in 2009.77 This served as a starkreminder of the deep recessionary period in theearly 1990s that was brought about by the collapseof the Soviet Union, one of Finlands largest tradingpartners, a slump in the forestry industry and thecredit crunch-like developments at home. The1990s were a time of industrial restructuring.

Notable inventions: Germany

Aspirin was invented in 1897 by Felix Hoffman, aGerman scientist working at Bayer & Co. Hoffmanbegan to experiment with substances derivedfrom willow plants that were an ancient remedyfor pain. After conducting tests on his father whosuffered from arthritis, Hoffman generated aversion of the drug that could relieve pain andinflammation without stomach irritation.

German inventors Jrgen Dethloff and HelmutGttrup patented the worlds first plastic card

with integrated circuitry in 1968. This laid thegroundwork for industries that are dependenton chip cards, including telephone cards, creditcards, and health cards.

In 1987, a research effort led by KarlheinzBrandenburg at the Fraunhofer Institute totransmit music over telecommunications linesculminated in one of the most popular musicformats in the world: the MP3.

Other: Printing press (c. 1450), automobile (1885),drip brew filter coffee (1908), small-formatcamera (1925)

Finland




2011 R&D as % of GDP: 3.1%


Transformation of

Finlands economy



Notable inventions: Finland

The man behind text messaging was MattiMakkonen, a former engineer for Finlandstelecom and post authority. He invented theShort Message Service (SMS) protocol in the1980s for exchanging text messages betweenmobile devices.

The Linux Operating System was created byLinus Torvalds in 1991 at the age of 22. He madehis work available free on the internet. Linux hasgained a reputation as a reliable operating system

and is most popular with serious computer usersand programmers.

In 2001, the Finnish food company Valio launched

lactose-free milk that, unlike previous low-lactose versions, retains the taste of normal milk.Valio has pioneered lactose removal methodswhich have been licensed around the world.

Other: Modern ice-breaking technology (1890),the first practical cellphone (1989), icetouchscreen (2010)

Finnish exports in electronics and other high-techproducts increased as the share of wood products,pulp and paper declined. The S&T policies thatwere put in place before the 1990s served Finlandespecially well during this period and helped ittransform into a fully-fledged knowledge economy.For instance, the programs that were set up in

the 1980s to support ICT, technology transfer andcommercialization, allowed Finnish companies,including Nokia, to benefit during the ICT boomof the 1990s. The ICT expertise had a positivespill-over effect in Finlands natural resourcesand manufacturing sectors in terms ofproductivity gains.78

Although Finland wasone of the first nationsin the 1990s to embracethe concept of a nationalsystem that integratespolicies on education,technology transfer

and R&D, a comprehensive innovation strategywas not put forth until 2008.79,80 The governmentacknowledged the need to improve existing systemsto maintain its level of prosperity and withstand achanging global reality and foreign competition.Finlands proposal took a novel approach to theconcept of innovation. The strategy emphasizescustomer- or consumer-centered innovation,which, by trying to satisfy the needs in so-called

lead markets, can allow individuals or entirecommunities to contribute to the process ofinnovation. The governments role is to stir updemand by influencing consumer behaviour andpublic perception, and simultaneously bolstersupply by providing innovative businesses withincentives, infrastructure and regulatory standards.Finland is participating in the European LeadMarket Initiative which has identified six leadmarkets: e-health, protective textiles, sustainableconstruction, recycling, bio-based products andrenewable energy.81

The position of pioneer requires renewalFinlands long-term investments in expertise and technological research& development have produced good results, and itssuccessful science and technology policy has created abasis for many successful industriesthe challenges ofgrowth and competitiveness can no longer be tackledonly by means of a sector-based, technology-orientedstrategy. Instead, a demand-based innovation policy mustbe strengthened alongside a supply-based innovationpolicy. Finlands Ministry of Trade and Industry SteeringGroup (2008)79

Consumer-centered

innovation and

market pull

approach


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A pervasive theme inFinlands innovationstrategy is the conceptof internationalization,

which is about accelerating the expansion of Finnishcompanies beyond the domestic market and buildingstrong international links. The national government

has had long-standing cooperation agreements withSouth Korea, Israel, Japan, China, Ukraine, Vietnam,and the US. It has also established FinNodeInnovation Centers in Shanghai, Californias SiliconValley, St. Petersburg and Tokyo to report back ondevelopments in host countries, to track investmentsand link Finnish institutes, innovators and companiesto global centers. The current strategy is alsostepping up the international marketing campaign topromote Finlands regional clusters as R&D locationsfor business. Finland has been unable to attractR&D-intensive foreign companies and international

experts. Finnish companies and would-beentrepreneurs have also been more risk-adversethan their foreign counterparts. The innovationstrategy called for changes in the financing systemto encourage individuals to be more entrepreneurial,as well as reforms in the tax system to attractinternational experts who might be deterred by

high personal income taxes.For this export-dependent country with a strong trackrecord in innovation yet a population of only about5.3 million, the critical question revolves around howto influence global knowledge flows and value chains.The innovation policy is directed at sutaining nationalprosperity and economic growth despite an ageingpopulation, concerns over climate change,sustainable development, and competitionfrom other equally export-oriented countries.

Internationalization

of R&D



CONCLUSION

Regardless of their state of development, nations are clearly making large investments in world-class researchcenters, education, commercialization, and entrepreneurship. The innovation snapshots presented in this papershow that there are several approaches to national innovation frameworks. While countries in the stay aheadcategory are targeting R&D areas to maintain leadership positions in S&T, other nations with ambitious targetsfor future S&T competitiveness in the emerging Asian market are spending substantially to modernize theirinnovation infrastructure to get ahead. India and many countries on the African continent, on the other hand,are battling entrenched problems associated with widespread poverty, disease, and crumbling infrastructure.Their governments see investments in S&T as a potential remedy to points of national pain. Some strategies areframed to exploit a countrys existing R&D strengths and bolster the industry and academic base in those areas.A number of national S&T plans fit into the prosperity category whose main objectives are not only to stay aheadof the pack but maintain the state of wealth and make the economy more resilient to economic recessions.

$24.3

$405.3

$38.4

$44.8$9.4

$10.8 $69.5

$153.7

$36.1

$6.3

CanadaP: 33,740G: $37,945

NetherlandsP: 16,531G: $40,715

United KingdomP: 61,838G: $36,496

United StatesP: 307,007G: $46,436 Israel

P: 7,442G: $27,673

IndiaP: 1,155,348G: $3,275

South KoreaP: 48,747G: $27,169

FinlandP: 5,338G: $34,652

ChinaP: 1,331,460G: $6,838

GermanyP: 81,880G: $36,449

2011 GERD (PPP, billions, US$)

P - Population (thousands)

G - GDP per capita (international $)

Country GERD as Percent of World

Canada 2.0%

UK 3.2%

China 12.9%

Germany 5.8%

South Korea 3.8%

Japan 12.1%

US 34.0%

Rest of the World 26.2%

Note: India (3.0%), Netherlands (0.9%), Israel (0.8%), Finland (0.5%)Source: Toronto Region Research Alliance analysis based on data from Battelle,

2011 Global R&D Funding Forecast.


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Societies worldwide are demanding solutions to pressing problems: climate change,health, disease eradication, food, water, and national security. Although the extentof each problem may vary from country to country, governments are spending tofind S&T-based solutions to the same underlying issues. Inevitably, nations find

themselves in a race to discover cures for cancer, create revolutionary energy storage and water treatmenttechnologies, advance personalized medicine, and secure cyberspace to safeguard personal and nationalidentity. In virtually all academic and industrial settings, scientists and engineers are vying to develop the next

breakthrough technology that could spawn entirely new industries or transform existing ones. R&D now topsmost national economic agendas and nations are racing to garner majority share of global innovation. Thereare certainly connections between a nations present innovation strategy, its state of economic development,history, and past innovation policies. In fact, the interplay between these factors offers opportunities forinteresting future research and study.

The Toronto Region Research Alliance hopes that this snapshot of S&T strategies around the globe will contributeto a meaningful discussion of Canadas future innovation ambitions. TRRA is seeking input on the issues examinedin this paper. Based on the current Canadian S&T strategy, the authors invite the reader to comment on howCanadas role can be understood within the context of the five categories that have shaped the discussion here.

If Canada were to frame its science and technology policy around one of the five themes, here are examples ofpossible outcomes. Canada is currently ranked ninth in the world in terms of gross expenditures on R&D. For

instance, a Canadian innovation strategy looking to stay ahead, would have to maintain a lead over the nationspresently in the number ten to fifteen positions: Russia, Brazil, Italy, Taiwan, Spain, and Australia. If Canada wereaiming to get ahead, this would involve significant investments to catch up to those in leadership positions. Theleap from ninth to fifth place would require R&D spending to double to nearly $50 billion. An innovation strategylooking instead to exploit Canadas existing strengths may focus R&D efforts on historically strong industries suchas

trra_the race for global leadership in innovation-an analysis of national randd strategies_march...

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